The Dow Jones Industrial Average slid down in its last trading on intraday levels, to incur losses for the second day in a row by -1.81%, losing about -613.89 points. It settled at the end of trading at the level of 33,296.97, after the index declined during Tuesday’s trading by - 1.14%, to record its worst daily performance in a month.
The government's report on producer prices showed that the annual rate of wholesale inflation eased to 6.2% in December, compared to 7.3% in the previous month. This was well below the 6.8% expected by economists.
The annualized core PPI excluding the more volatile food and energy sectors came in at 5.5%, this was below expectations of 5.7%.
The lower-than-expected inflation stats have reinforced the widely held belief that the Federal Reserve will raise interest rates by only 25bps at its next meeting, due in two weeks. Markets are currently pricing in a 95% chance, up by 25bps, compared to 77% a week ago.
However, investors saw negative signs in other economic reports released on Wednesday. Retail sales fell 1.1% in December, a sharper decline than economists expected in a similar sign of slowing growth. A separate report noted that industrial production also fell more than expected. in December, down 0.7% from the previous month.
In an interview with the Associated Press, Cleveland Fed President Loretta Meester said the Fed would have to raise interest rates above 5% to get inflation at the 2% target. Meester is among the most consistently hawkish members of the central bank's rate-setting committee.
Dow Jones Technical Analysis
- Technically, the index declined following the stability of the stubborn 34,281.36 resistance level, with the start of negative signals in the relative strength indicators.
- This happened after reaching highly overbought areas, so the index, with its recent decline, exceeded the support of its simple moving average for the previous 50-day period, which exposes it to negative pressure during its upcoming trading.
- Especially if it breaks a minor upward slope line, as shown in the attached chart for a (daily) time period.
Therefore, our expectations indicate a further decline for the index during its upcoming trading, as long as the 34,281.36 resistance remains intact, targeting the 32,582.00 support level.
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